BILL NUMBER: AB 410	CHAPTERED  08/30/99

	CHAPTER   253
	FILED WITH SECRETARY OF STATE   AUGUST 30, 1999
	APPROVED BY GOVERNOR   AUGUST 30, 1999
	PASSED THE ASSEMBLY   AUGUST 16, 1999
	PASSED THE SENATE   JULY 15, 1999
	AMENDED IN SENATE   JUNE 14, 1999
	AMENDED IN ASSEMBLY   MARCH 24, 1999

INTRODUCED BY   Assembly Members Lempert and Papan

                        FEBRUARY 12, 1999

   An act to amend Sections 17312 and 17409 of the Financial Code,
relating to escrow agents.


	LEGISLATIVE COUNSEL'S DIGEST


   AB 410, Lempert.  Escrow agents.
   Existing law, the Escrow Law, provides for the licensure and
regulation of escrow agents.  Every person licensed pursuant to that
law is required to participate as a member of the Escrow Agents'
Fidelity Corporation (Fidelity Corporation).
   This bill would limit that membership requirement to those persons
engaged in the business of receiving escrows in certain types of
transactions.  It would limit Fidelity Corporation coverage to loss
of trust obligations with respect to those transactions and would
require escrow agents to provide indemnity coverage with respect to
other transactions, as specified.  The bill would require the deposit
of escrow funds into certain types of accounts and financial
institutions, as specified.  The bill would require that under
certain circumstances an escrow agent maintain separate escrow trust
accounts.
   Existing law provides that a willful violation of the Escrow Law
is a crime punishable as either a felony or misdemeanor.
   By establishing new requirements for escrow agents, the violation
of which would be a crime, this bill would impose a state-mandated
local program by creating a new crime.
  The California Constitution requires the state to reimburse local
agencies and school districts for certain costs mandated by the
state. Statutory provisions establish procedures for making that
reimbursement.
   This bill would provide that no reimbursement is required by this
act for a specified reason.


THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:


  SECTION 1.  Section 17312 of the Financial Code is amended to read:

   17312.  (a) Each person licensed pursuant to this division who is
engaged in the business of receiving escrows specified in subdivision
(c) shall participate as a member in Fidelity Corporation in
accordance with this chapter and rules established by the board of
directors of Fidelity Corporation.  Fidelity Corporation shall not
deny membership to any escrow agent holding a valid unrevoked license
under the Escrow Law who is required to be a member under this
subdivision.
   (b) Upon filing a new application for licensure as required by
subdivision (b) of Section 17213, persons required to be a member of
Fidelity Corporation shall file a copy thereof concurrently with
Fidelity Corporation, but no additional membership fee or deposit
shall be required.
   (c) The required membership in Fidelity Corporation shall be
limited to those licensees who engage, in whole or in part, in the
business of receiving escrows for deposit or delivery in the
following types of transactions:
   (1) Real property escrows, including, but not limited to, the
sale, lease, exchange, or transfer of title, and loans or other
obligations to be secured by a lien upon real property.
   (2) Bulk sale escrows, including, but not limited to, the sale or
transfer of title to a business entity and the transfer of liquor
licenses or other types of business licenses or permits.
   (3) Fund or joint control escrows, including, but not limited to,
transactions specified in Section 17005.1, and contracts specified in
Section 10263 of the Public Contract Code.
   (4) The sale, transfer of title, or refinance escrows for
manufactured homes or mobilehomes.
   (5) Reservation deposits required under Article 2 (commencing with
Section 11010) of Chapter 1 of Part 2 of Division 4 of the Business
and Professions Code or by regulation of the Department of Real
Estate to be held in an escrow account.
   (6) Escrows for sale, transfer, modification, assignment, or
hypothecation of promissory notes secured by deeds of trust.
   (d) Coverage required to be provided by Fidelity Corporation under
this chapter shall be provided to members only for loss of trust
obligations with respect to those types of transactions specified in
subdivision (c).  Indemnity coverage for those types of transactions
not specified in subdivision (c) shall be provided by escrow agents
in accordance with Section 17203.1.
  SEC. 2.  Section 17409 of the Financial Code is amended to read:
   17409.  (a) All moneys deposited in escrow to be delivered upon
the close of the escrow or upon any other contingency, shall be
deposited and maintained in a noninterest-bearing demand or checking
account in a bank, a state or federal savings bank, or a state or
federal savings association  or in a noninterest-bearing account
subject to immediate withdrawal in an industrial loan company insured
by the Federal Deposit Insurance Corporation and approved to receive
those moneys by the commissioner.  Thereafter, these moneys may be
deposited in an interest-bearing account in a bank, a state or
federal savings bank, a state or federal savings association, an
industrial loan company approved to receive those moneys by the
commissioner, or a state or federal credit union, if the depositor is
qualified for membership under the bylaws of that credit union, and
the moneys are maintained separate, distinct, and apart from funds
belonging to the escrow agent.  Those funds, when deposited, are to
be designated as "trust funds," "escrow accounts," or under some
other appropriate name indicating that the funds are not the funds of
the escrow agent.
   Upon request of the commissioner, a licensee shall furnish to the
commissioner an authorization for examination of financial records of
any trust funds or escrow accounts, maintained in a financial
institution, in accordance with the procedures set forth in Section
7473 of the Government Code.
   (b) A licensee engaged in the business of receiving escrows for
deposit or delivery of the types specified in subdivision (c) of
Section 17312 and of the types not specified therein shall maintain
separate escrow trust accounts, for both types of escrow business in
the same manner as provided in subdivision (a) of this section and
Sections 17409.1, 17410, 17411, and 17411.1.
  SEC. 3.  No reimbursement is required by this act pursuant to
Section 6 of Article XIIIB of the California Constitution because the
only costs that may be incurred by a local agency or school district
will be incurred because this act creates a new crime or infraction,
eliminates a crime or infraction, or changes the penalty for a crime
or infraction, within the meaning of Section 17556 of the Government
Code, or changes the definition of a crime within the meaning of
Section 6 of Article XIIIB of the California Constitution.
